Cost of borrowing from an AAA-rated corporate bond is around 8.45-8.5 per cent while through a AA-rated instrument, it is around 9.5-10 per cent.

An NBFC with a better credit risk profile can borrow at a further lower rate from the bond market.

According to Ajay Manglunia, senior vice-president (fixed income) at Edelweiss Securities, NBFCs are tapping the corporate bond market as the rates are lower and they can save their margins.

"Unless and until they optimise their borrowing costs, it is difficult for them to remain competitive and to maintain margins. So, they look for avenues where funds can be raised at a cheaper level," he said.